Lowe’s on Wednesday stood by its full-year forecast, as growing sales among home professionals helped offset slower demand from do-it-yourself customers.
The home improvement retailer came in just shy of Wall Street’s expectations for quarterly sales, but beat earnings estimates.
In the company’s news release, CEO Marvin Ellison said investments in its stores, technology and customer service have helped the retailer get through “near-term uncertainty and housing market headwinds.”
Home improvement demand has been in a sluggish stretch as high interest rates and slower housing turnover ding U.S. consumers’ appetite to spend on pricier projects. With its outlook, Lowe’s predicted it will snap out of the sales slump this year, but only with slight year-over-year gains.
Lowe’s said it expects full-year total sales to range from $83.5 billion to $84.5 billion, which on the upper end would be higher than its total revenue of $83.67 billion for fiscal 2024. It said it projects comparable sales to be flat to up 1% year over year and earnings per share to range from approximately $12.15 to $12.40.
Here’s what the company reported for the fiscal first quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $2.92 vs. $2.88 expected
- Revenue: $20.93 billion vs. $20.94 billion expected
In the three-month period that ended May 2, Lowe’s net income fell to $1.64 billion, or $2.92 per share, compared with $1.76 billion, or $3.06 per share, in the year-ago quarter. Revenue fell from $21.36 billion.
Comparable sales decreased 1.7% year over year. Unfavorable weather hurt sales demand, but sales on Lowe’s website and among home professionals grew, Ellison said on the company’s earnings call.
Sales to home professionals grew by mid single-digits in the quarter, he said. Ellison attributed those gains to investments Lowe’s has made in the business since 2018, including expanding its merchandise lineup and launching a pro loyalty program.
Sales trends across the business improved as the weather got better and customers turned to the company’s stores for garden supplies, outdoor power equipment and other spring items like grills and patio furniture, Ellison said.
Comparable sales declined 5.4% in February compared with the year-ago period due to poor weather, CFO Brandon Sink said. He said comparable sales in March rose 1.7% and declined 2.6% in April. Some of that difference was due to the timing of Easter, which shifted from March to April. Lowe’s stores are closed on Easter.
Compared with other retailers, Lowe’s customers are typically in a more financially stable position since they tend to be homeowners. Sink said the consumer overall is “very healthy,” but they’re still putting off bigger purchases and projects.
When it comes to that kind of spending, he said customers are “still mainly sitting on the sidelines.” But, he added, “the good news is the trends aren’t getting any worse.”
He said Lowe’s is waiting for “the inflection point” that leads to a meaningful increase in discretionary projects and store traffic from do-it-yourself shoppers, but he doesn’t expect to to come this fiscal year.
Like Lowe’s, competitor Home Depot reaffirmed its full-year forecast earlier this week and posted year-over-year comparable sales declines. Home Depot’s fiscal first quarter also got a significant lift from SRS Distribution, a company it acquired that sells supplies to home professionals in roofing, pools and landscaping.
Both companies have tried to attract more sales from home professionals. Lowe’s announced in April that it was acquiring Artisan Design Group, a company that provides design services and installation of flooring, cabinets and countertops for homebuilders and property managers, in a $1.3 billion deal.
For Lowe’s and other retailers, higher tariffs have meant higher costs for retailers that import goods from across the world. In recent days, retailers have shared different approaches for managing those costs. Walmart CFO John David Rainey said the company would absorb some costs and expected suppliers to do the same, but warned it would have to raise prices for customers. Home Depot’s CFO Richard McPhail, on the other hand, said the company intended to “generally maintain our current pricing levels across our portfolio.”
On Lowe’s earnings call, Ellison said the company will work with suppliers and do its best to minimize the impact on customers. Plus, he said, it wants to stay price competitive with other home improvement retailers.
“We’re not in the habit of donating market share to the competition,” he said.
He said Lowe’s is trying to diversify its imports and that about 60% of Lowe’s purchases come from the U.S. Over the past few years, he said Lowe’s has worked with its suppliers on its sourcing. As a result of that, only about 20% of the company’s purchase volume is from China, he noted.
“Our global sourcing team has identified exciting diversification opportunities in the U.S. and around the globe that we’re actively pursuing,” Ellison said.
Some of those imports that come from China include artificial Christmas trees, ceiling fans, small appliances and tools, said Bill Boltz, executive vice president of merchandising. He said the company is working with suppliers to find different countries to produce those goods.
